For the last three weeks, gold has experienced something that has never happened before – hedge funds' aggregate net position has been short for the first time in history.

However, as Dana Lyons notes, this week saw another ‘historic' shift in gold positioning as commercial hedgers shifted to the least hedged since 2001… so the ‘fast' money is chasing momentum and the ‘smart' money is lifting hedges into them.

 Dana Lyons notes,

It's no secret that commodities have taken a drubbing during the deflationary spiral over the past year. And precious metals have been right up front in this beating. This includes gold, which has lost over 40% of its value the past 4 years.  So needless to say, there has not been much good news on that front. However, as we touched on in a piece two weeks ago, there are signs beginning to pop up that may provide a glimmer of hope for gold bugs. In dollar terms, the price of gold continues to leak, offering very little evidence of any impending stability or bounce. On the other hand, in Euro terms, gold prices reached a key juncture a few weeks ago, as outlined in that previous post. And while no bounce has materialized as of yet, gold has at least held at the level we noted.

Today's Chart Of The Day offers another hopeful data point for gold bulls. The CFTC tracks the net positioning of various groups of traders in the futures market in a report called the Commitment Of Traders (COT). One such group is called Commercial Hedgers. As their name implies, their main function in the futures market is to hedge. And while the Non-Commercial Speculators tend to be trend-following funds, the Commercial Hedgers' postions tend to move contrary to price trends. Thus, it is almost always the case that these Hedgers will be correctly positioned – and to an extreme – at major turning points in a market.